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TSCA Inventory Needs to be Sustained, Not Depleted

Date: Jan 16, 2009

The U.S. Environmental Protection Agency (EPA)'s latest chemical management effort—"resetting" the Toxic Substances Control Act (TSCA) Chemical Substance Inventory (Inventory)—is an overzealous attempt to remove cobwebs from the attic, questionable in its ability to reduce the Agency's workload of existing chemicals, and would provide no valuable environmental benefits.

Designed to "eliminate" the authorization to use chemicals that are purportedly no longer in commerce, TSCA reset means significant expenditures of time and resources by the chemical industry to ensure that critical materials are not inadvertently deleted from the Inventory. Significant outreach to small and medium-size businesses is needed so that these companies do not miss the opportunity to police their products during the reset. For a copy of the Agency's November 25, 2008, document discussing its reset plans.

EPA is considering an approach under which persons would be invited to certify online via a secure EPA website that they have manufactured a chemical listed on the Inventory within a specified timeframe. As EPA points out, as section 8(b) specifies that the Inventory may not include any chemical substance which was not manufactured or processed within three years before the effective [date] of the initial Inventory reporting rules, EPA is considering a three year time period for the Inventory reset process.

In other words, if the substance had not been manufactured or imported within the past three years it would be delisted from the Inventory. The practical effect of a "clean" reset Inventory is that any chemical not on the reset Inventory would be subject to TSCA section 5(a) premanufacture notification (PMN) reporting requirements prior to manufacture or import.

EPA is asking for comments on this approach by January 23, 2009, as well as on related questions and possible alternatives. The key areas for comments include:

• Whether EPA should issue a reporting rule under TSCA section 8(a) in lieu of requiring electronic three-year limited certification under TSCA section 8(b).

• Suggesting alternatives to delisting. Examples of alternatives are to insist that EPA issue significant new use rules (SNURs) for all or certain of such substances, and to advocate keeping all existing substances on the Inventory, with a notation (or separate section) that identifies each as "active" or "inactive." If a company were to commence a substance noted as "inactive," a simple "Resumed Notice of Commencement" form could be filed to put the Agency on notice of a resumption of activity.

• Whether an expanded set of activities should be permitted to form the basis for making a certification to keep a substance on the Inventory. Approaches in addition to manufacture or import within some limited past time period could include processing and use (thereby creating the need for import or manufacture that a supplier may not be aware of at the present time) and a bona fide intent to manufacture or import in the future. In addition, because research and development (R&D) is a "commercial" activity for TSCA purposes (prompting the need for 40 C.F.R. § 720.36), it would not be difficult for companies to manufacture or import miniscule quantities of substances that have been out of full-scale production during the 3-year (or other specified) window and legitimately claim that the chemical is in U.S. commerce. Although we do not support a volume threshold for the reset, EPA should allow R&D activity as a basis for retaining a TSCA Inventory listing.

• Advocating a formal Inventory correction process. For many years, EPA's willingness to permit Inventory corrections has been in decline. Without a formal process, this opportunity could be eliminated altogether. With new attention on changes to the Inventory that may have unintended and unanticipated effects, the need for a correction mechanism is more important than ever. Whether the Agency should provide a time-limited process for corrections of errors directly resulting from the certification process must be addressed.

• As importers often do not know the identity but rely on supplier certification of TSCA status, provisions must be made for foreign manufacturers to preserve the confidential identities of the tradename substances that they export to the U.S.

These are just some of the detailed implications we see for industry based on counseling our clients on TSCA and Inventory requirements through the years. The broader but no less important consideration to bear in mind is the need to remind EPA and the public about the key features of the legislative compromise that TSCA represents so that they are not trampled on or eliminated under the guise of modernization.

In our opinion, EPA has an obligation to maintain the existing Inventory and it should not be wasting its limited time and resources adopting a reset policy that is patently beyond the scope of the authority it has been delegated. TSCA reset will not forestall calls for TSCA reform, as reset does nothing to improve the adequacy of EPA's existing authority to address concerns about chemicals actually in commerce in the meantime. Moreover, EPA has not enunciated a sound justification for the reset under any of the statutory or executive order mandates that are relevant to these kinds of actions. EPA must justify its actions and take into account impacts on small business, energy, and unfunded mandates under several statutes and executive orders. The list of legal obligations affecting EPA's rulemaking authority includes but is not limited to:

• Executive Order 12866, Regulatory Planning and Review (58 FR 51735, October 4, 1993);
• Executive Order 13211, Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use (66 FR 28355, May 22, 2001);
• OMB approval under the Paperwork Reduction Act (PRA), 44 U.S.C. § 3501 et seq.;
• Enforceable duties that contain unfunded mandates as described under Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (Public Law 104–4); and
• Regulatory Flexibility Act (RFA) (5 U.S.C. § 601 et seq.) considerations for small entities.

EPA already knows which chemicals on the Inventory are actually in commerce in significant amounts through the periodic reporting by companies under the TSCA Inventory Update Reporting (IUR) process. Reset theoretically will only remove from the Inventory those substances that are not in commerce and hence not of concern in any event. The benefits of a smaller Inventory are insufficient in comparison to the likely administrative costs to industry and EPA of the reset process.

Assume that EPA has the authority to delist substances that were the subject of a PMN review or an original Inventory listing. In that case, the certification process that EPA envisions should be followed by a notice of proposed rulemaking that specifically lists each substance that will be delisted. There is no need to deviate from the normal delisting procedures that have been followed since the early 1980s. See, e.g., 60 Fed. Reg. 33,201 (Jun. 27, 1995). After an Inventory correction has been approved, EPA typically publishes a delisting notice in the Federal Register for the "old" listing of the chemical substance that is being corrected. This is necessary to protect the rights of those parties that have undertaken investment backed expectations to manufacture a substance that is accurately described by the "old" listing. The "old" listing is not deleted from the Inventory if it is shown that: (1) the substance was manufactured, imported, or processed for commercial purposes (other than for research and development) between January 1, 1975 and the date of the proposed delisting; (2) any person can show that the substance could have been properly reported for the Inventory; or (3) any person believes that the substance should not be removed from the Inventory for any reason. In our opinion, no less should be required under a reset.

Does EPA Have the Authority to Delist Properly Reported Substances from the Inventory?

The threshold question is whether EPA has authority to reset the Inventory on any basis other than the substance was not properly initially reported for the Inventory. EPA's legal position appears to be based on the "keep current" language of section 8(b) of TSCA. The Agency would like to see this provision interpreted in a manner that provides it with the authority to remove from the Inventory any substance not "currently" (a term yet to be defined) in commerce.

In our opinion, the "keep current" language was primarily intended to reflect the obligation of EPA to add to the Inventory substances that have been reviewed under section 5(a) of TSCA and commercially produced under non-exempt circumstances. The Inventory was intended to be dynamic, not static, as in some other foreign jurisdictions. The "keep current" language is also reasonably interpreted as obligating EPA to ensure that existing listings reflect state-of-the-art understanding of chemical structures. When new analytical techniques reveal previously unrecognized structural complexities for a compound, "keeping current" the Inventory means updating the listings for all derivative substances. Under EPA's "keep current" authority, these nomenclature maintenance revisions to the Inventory do not require new PMNs, but could be done through rulemaking or, perhaps, administratively pursuant to some principles established through rulemaking.

Section 8(b) of TSCA specifies that the Inventory must "at least include each chemical substance which any person reports, under section 5 or subsection [8](a) of this section, is manufactured or processed in the United States." Thus, EPA has no authority under this provision of the statute to remove from the Inventory: (1) any substance which underwent PMN review under section 5(a) and for which a notice of commencement (NOC) of manufacture or import has been filed, or (2) any substance that was reported for the initial Inventory pursuant to section 8(a). The only limitation that section 8(b) places on the scope of the Inventory is that it is not to include "any chemical substance which was not manufactured or processed in the United States within three years before" 1978, when initial Inventory reporting requirements became effective. If EPA currently has the authority to reset the Inventory at any time, as it now purports, there would have been no need for section 8(b) to carve out pre-1975 substances as EPA could have deleted those substances from the Inventory at any time.

Some have argued that reset would be a feature of any legislative reform of TSCA, and, accordingly, it is better to allow EPA to proceed with a reset now in order to forestall further efforts at TSCA reform. We doubt that those who champion a revamping of TSCA are concerned about the overall number of substances on the Inventory. A more central concern of the proponents of TSCA reform is that EPA has failed to act to restrict or ban those chemicals that are actually in commerce that activists and others have targeted. EPA has sufficient authority to address the health, safety, and environmental implications of chemicals, but has failed to do so, in our opinion, because of the EPA staff's belief that doing so is too difficult. A smaller Inventory does not address these concerns and only serves to focus attention on those chemicals that are no longer in use. There are more productive ways to simply identify those chemicals that remain in use. If Congress chooses to amend TSCA to specifically authorize a reset (and more), then let the reset proceed. Otherwise EPA squarely faces an ultra vires challenge if it conducts a wholesale removal of previously notified chemical substances.

The Scope of Reset Should be Limited

Some may argue that it is appropriate to delete those substances added to the initial Inventory that are no longer in commerce because the original property right rationale for grandfathering these substances has disappeared. However, all substances on the Inventory are chemical substances that have been manufactured for non-exempt commercial purposes whether they were part of the initial Inventory or were added by the PMN process followed by an NOC. EPA has no more authority to remove substances properly listed by one procedure than substances more recently added after PMN review. The fact that a different threshold applies to imposing restrictions on existing substances as compared to new substances is part of the core structure of TSCA. The fact that deleting substances from the Inventory because economic conditions that made production profitable at one time have since changed is ultra vires is most apparent when one views the consequences of such a procedure on substances that were added to the Inventory after having gone through the PMN review process.

The reset exercise should exclude from consideration any substance that has gone through the PMN review process, regardless of whether non-exempt commercial production has since commenced. Once a PMN has cleared EPA review, the submitter of the PMN is entitled to manufacture the substance at any time. The submitter should not have to undergo this process again. The right to manufacture or import following a favorable PMN review arises specifically because the substance is not yet on the Inventory and is not extinguished when non-exempt commercial production begins. This right to manufacture a notified substance is specific to the submitter under section 5 of the Act and arises by virtue of the submitter complying with the 90-day notification period and providing EPA the opportunity to decide whether to regulate the substance. Because the PMN submitter's right to manufacture is not dependent upon Inventory status, it follows that the right granted by statute may not be extinguished by EPA regardless of whether submitter has already chosen to exercise that right (and has triggered an Inventory listing that benefits others).

The reset also should not apply to polymers, microorganisms, and other substances that are exempt from IUR. These should remain on the Inventory and should be ineligible for delisting.

TSCA "Polymer Exemption" Ramifications Should be Considered

Among the criteria for the TSCA "polymer exemption" (40 C.F.R. § 723.250) is the requirement that a polymer cannot be manufactured under the exemption if the polymer is prepared from monomers and/or other reactants charged or incorporated at levels of greater than 2 weight percent that are not on the TSCA Inventory or manufactured under an applicable TSCA section 5 exemption. As EPA is aware, in practice, the use of non-Inventory listed monomers or reactants at 2 percent or less generally is applicable only to imported polymers because chemical substances used as feedstocks in domestic manufacture must be on the Inventory or otherwise excluded or exempted from the section 5 requirements. Thus, a reset that delists monomers used to manufacture polymers under the polymer exemption will further restrict the availability of the polymer exemption and will render more polymers that present no unreasonable risk subject to PMN review, further burdening EPA's sparse resources.

EPA Should Use a Re-Listing Procedure and Not Require a PMN or SNUN

Requiring a PMN or a SNUN for a delisted substance is overly burdensome and unnecessary. Instead, a person who wishes to manufacture or import a delisted substance should only have to submit a simple notification to EPA indicating its intent to re-commence manufacture or import. A procedure and form such as the NOC form should be all that is required.

Potential Liability Issues Should be Considered

Preparing for the reset undoubtedly will result in companies uncovering errors and/or potential compliance issues. Any reset process should provide amnesty for companies and chemicals manufactured or imported in good faith above and beyond that provided for in the TSCA Enforcement Response Policies and EPA's Audit Policy.

Closing Thought: Inventory Nomenclature is the Real Problem

In our opinion and experience, to the extent the Inventory has a problem, it is not that it is too large or out-of-date, rather that it is replete with inaccuracies and inconsistencies. These inaccuracies and inconsistencies not only plague existing and "new" manufacturers and importers of the substances, per se, but ripple throughout the product chain and have major impacts on manufacturers of derivative substances.

When scrutinized using today's technology and EPA's ever-changing (and sometimes unpublished) TSCA nomenclature rules, many substances that were reported for and appear on the initial Inventory would be named differently today. As EPA is well aware, there are many substances which were properly reported for the Inventory that appear on the Inventory under an "incorrect" chemical name. EPA must consider under what circumstances a manufacturer or importer of such a substance properly may certify that the "substance" that is proposed for delisting has been manufactured or imported for purposes of the reset. In but one well-known example of a pervasive nomenclature issue, despite numerous Inventory listings to the contrary, "nonylphenol" generally does not correctly represent current commercially manufactured "nonylphenol" products and their derivatives; the proper name for commercial nonylphenol generally reflects that it is "branched" and substituted in the "4-" or "para-" position. See 55 Fed. Reg. 5,991 (Feb. 21, 1990). Notwithstanding this well known fact, many substances continue to exist on the Inventory with chemical identities that inaccurately omit the "branched" or "4-" modifiers. Many other examples of inaccurate entries exist.

Instead of reducing the size of the Inventory, EPA could increase its accuracy. At a minimum, EPA could focus on correcting the specific chemical names of substances that were added to the Inventory before EPA strengthened its nomenclature requirements in 1995. See 60 Fed. Reg. 16,298-16,302 (Mar. 29, 1995). Only for substances added after that time should EPA shift focus to shortening what will then be a more accurate list. Thus, in terms of priorities, all efforts to reset the Inventory should be postponed until an effort to correct inaccurately described entries has been undertaken. Attempting to reset the Inventory without correcting these long ignored issues will put manufacturers in a difficult position when certifying as to current commercial activity. The following priorities should apply to this process: (1) initial Inventory substances; (2) substances added to the Inventory by PMN prior to 1995; and (3) substances added to the Inventory by PMN after 1995.

Inventory status confers substantial rights upon a substance, and the companies that manufacture or import the substance. Any actions that limit these rights should be carefully tailored and legally sound.